Millions being delivered for the water sector, but billions are needed

By Merylyn Hedger and Sejal Patel

The recent Fiji/ Bonn COP grappled with the mobilisation of finance for country’s Nationally Determined Contributions (NDCs). These NDCs are a powerful framework for setting out national climate action priorities, with ongoing revisions, and guiding national efforts to address climate change challenges, including climate resilience of which climate-resilient infrastructure is key.

The inclusion of adaptation in the first round of (Intended) Nationally Determined Contributions, prior to the Paris COP, was a contested issue. Developed countries wanted the focus to be on mitigation. For developing countries that covered adaptation in their NDCs, water was the priority sector for action. In the UNFCCC Synthesis of NDCs, capturing the submissions of 161 parties, water emerges as the leading sector for adaptation actions (emphasized by 137 developing countries). Proposed actions and measures for the water sector in the NDC reports covered water conservation, increased supply measures, wastewater treatment and better water management efforts[1].

Key climate hazards identified by developing countries also relate to the water sector. Floods were raised by more than 80 countries and droughts by more than 70, coastal erosion in over 20 countries and saltwater intrusion in over 20 countries. Also mentioned is decreased precipitation over 40 countries, changes in precipitation timing over 40 countries and increased precipitation intensity over 30 countries [2].

This is not surprising. The impacts of climate change will be channelled primarily through the water cycle with consequences that could be large and uneven across the globe, according to the World Bank[3]. Importantly, water is also key to the world’s ability to cope with climate change. Growing populations, rising incomes and expanding cities will converge upon a world where the demand for water rises exponentially, while supply becomes more erratic and uncertain[4].

Momentum to address challenges in the water sector have been building in international development debates. For the first time in history, the international community adopted a global water goal as the Sustainable Development Goal (SDG) six on water, part of the 2030 sustainable development agenda. Since 2012, water crisis has been in the World Economic Forum’s top five global risks each year. Water scarcity or the lack of water to meet the demand of a population is a critical issue for more than 40 per cent of the world population and affects over 1.7 billion.

 

So how much climate finance is needed for the water sector?

Overall annual costs for adaptation have been variously estimated, one of the most recent estimates being the UNEP 2016 Gap Report at between $140 billion to $300 billion by 2030[5]. For the SDG on WASH (which aims to ensure water and sustainable management of water and sanitation for all, with eight target activities stretching to 2030), it has been calculated that existing annual investments need to increase threefold to $114 billion and it is unlikely, apparently, that the impact of climate change has been factored into these estimates[6]. Yet it is widely recognised that all planned new investments must allow for resilience in the face of climate change; and, existing infrastructure need to be made resilient to the impacts.

It is estimated that as much as 63% of the capital spending is required in Sub-Saharan Africa, Southern Asia and Southeast Asia where rapid urbanisation and population growth are major trends. One study has estimated that extending basic WASH services to the unserved (SDG 6.1 and 6.2) will cost $ 28-4 billion per year between 2015-2030 and that capital costs amount to about three times current investment levels[7]. A different approach to costs has been applied by the World Bank which is the costs of the impacts on economic growth. These have been identified as much as 6% of GDP by 2050 as a result of water-related losses in agriculture, health, income and property[8]. More recent work on water insecurity has estimated that global economic losses from inadequate water supply and sanitation are $260 billion per year and the global economic cost of water insecurity to existing irrigators is $94 billion per year[9].

Accurate figures on the costs of addressing the impacts of climate change on the water sector are not available, due to uncertainty about the impacts, what technologies will be used, where and when and all the consequent interaction of interventions implications in the system[10]. The situation is further complicated by what has been described as the adaptation or development deficit, which likely overlaps with SDG Six[11]. Basically, with gaps in existing services and provision, there is a deficit which needs to be addressed before climate change is factored in. There have been issues in the GCF Board about what is a climate change project/ and what is a development project- the long-running additionality issue[12].

 

How much climate finance is being delivered for the water sector?

It is a challenge to determine. There are various data sets which reflect different sources and purposes: private/public; global/developing countries/LICs; water supply/ multi- focused; climate change focused/all ODA. The 2017 CPI Global Landscape Report has strong caveats about the lack of full knowledge about domestic government expenditure on climate finance and private investments in adaptation. It examines water and waste management as a sector within public finance and does not differentiate between developed and developing countries. Within this framing mitigation dominates over adaptation 83% compared to 17% in 2015-16 and within that water and waste water management gets over 50% (some $11 billion of $21 billion). Looking at OECD DAC data, water fares well in adaptation spend with around one –third in 2015, some $3.7 billion of climate-marked spending, but this would cover both the principal and significant categories (climate change as a focus of development assistance rather than as another benefit).

 

Chart 1: Water related approved spending by fund 2006 – 2017 (Data source: CFU)

 

Focusing on the provision of dedicated multilateral climate funds for the water sector, Climate Funds Update (CFU) provides the potential to unpack spending by project type and source. Looking at this data in aggregate, between 2006-2017 a total of $1599 million was allocated to 187 water projects, of which 153 were focused on adaptation. Two-thirds went through UNFCCC funds, and the rest through a variety of funds such as the German International Fund (IKI) and DFID’s ICF, but principally the PPCR- one of the World Bank’s Climate Investment Funds – see chart 1. Chart 2 illustrated a peak in 2013 with a significant trend decrease to 2016. However, in 2017, the GCF provided a significant funding boost, and a recharged Adaptation Fund (AF) also came back on stream. Significantly, projects funded by the GCF were substantially larger, average $39 million, compared to $8 million from the AF.

 

Chart 2: Water related projects approved over time 2006 – 2017 (Data source: CFU)

 

The CFU data also enable another critical issue to be explored – the sectoral spread of water projects – chart 3. Water lies at the nexus of food security, poverty reduction, economic growth, energy production and human health[13]. Whilst by far the most was allocated to adaptation –and the great majority of those focused on water and sanitation, funds such as the BioCarbon Fund had water projects relating to REDD. A small number of projects covered energy generation, energy efficiency and energy supply, principally for agriculture. Overall the sectors covered in the analysis are: agriculture; coastal management; disaster risk reduction; fishing; food security; forestry; general environmental protection; land-based mitigation; multisector projects; rural development; transport and storage; water and sanitation; and water management.

 

Chart 3: Approvals of water related project approvals by sector 2006 – 2017 (Data source: CFU)

 

Currently, there are a number of different approaches for classifying water projects, depending on how far water management extends into river basins, ecosystems, and coastal protection and what the focus is. In the Green Climate Fund (GCF) classification water security falls within the results area “Increased resilience and health and well-being, and food and water security” (HRWS). An examination of all the GCF approved projects suggests that around half can be seen as relating to water, but only a small percentage relate to core water management issues for people. The PPCR seems to closely link water to agriculture including sustainable water and land management practices. When links to mitigation are included the position is the more complex.

 

So where next?

It would seem that the needs for spending on water to address development deficits in SDG 6 and to cope with climate change are way below what is being delivered. It has been said that “water is to adaptation what energy is to mitigation[14]. So, it is self-evident that there will be wide ramifications and inter-connections with the whole climate change adaptation agenda but it is not yet clear that the resulting challenges for tracking, and transparency are recognised.

In order to track progress, in another sector, data on energy is categorised and disaggregated in a clear way for data collection and tracking, see for example the Global Tracking Framework on Sustainable Energy. The first SE4All Global Tracking Framework identified indicators that track progress toward the SE4All objectives of universal access to modern energy, doubling the rate of energy efficiency improvements and doubling the share of renewable energy consumption in the global energy mix[15]. The OECD classification of water sector spending for bilateral assistance and the targets for Goal 6 on Water in the SDGs do provide a basic reference frame. The challenge however, is to identify the additional climate change element on which all can agree, and against which then climate finance can be tracked in the water sector. Unless this happens, there is likely to be an ongoing confused picture of what is being provided for what and whether it is making an impact.

More attention must be paid to monitoring spending on water actions as a first step to tracking progress, if the billions needed for implementing the NDCs are to be delivered and used effectively.


[1] UN Climate Partnerships for the Global South and the UNFCCC 2016 Catalysing the implementation of NDCs in the context of the 2030 Agenda through South-South Cooperation

[2] UNFCCC 2016. Aggregate effect of the intended nationally determined contributions: an update. Synthesis report by the secretariat. FCCC/CP/2016/2. Available at: http://unfccc.int/resource/docs/2016/cop22/eng/02.pdf

[3] World Bank 2016 High and Dry: climate change, water and the economy. Water Global Practice World Bank Washington

[4] ibid

[5]  These issues have been fully analysed in the UNEP 2016 Adaptation Finance Gap Report chapter 2 pages 13-14

[6] Hutton G and Varuhrese, M 2016 The costs of Meeting the 2030 Sustainable Development targets of drinking water and Sanitation and Hygiene. Water and Sanitation program, World Bank Group Washington, DC

[7] Hutton Gand M. Varughese 2016

[8] World Bank 2016 High and Dry: Climate Change, Water and the Economy Executive Summary World Bank Washington

[9] OECD 2017 Background Paper Roundtable on Financing Water OECD-WWC-Netherlands Round Table

[10] These issues have been fully analysed in the UNEP 2016 Adaptation Finance Gap Report chapter 2 pages 13-14

[11] Ian Burton 2004 the Adaptation Deficit

 

[13] World Bank 2016 High and Dry: climate change, water and the economy. Water Global Practice World Bank Washington

[14] ibid

[15] http://gtf.esmap.org/downloads

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